HMRC IR35 Tax Court Defeat
There has been a heavy HMRC IR35 Tax Court Defeat which has ramifications for all freelancers and contractors.
HMRC claimed that an IT Contractor, a Mr Wells, fell inside IR35 on a contract.
The HMRC IR35 Tax Court defeat will affect all contractors – especially those working in the public sector.
IT Contracting for 25 Years
Altogether he has been IT Contracting for 25 years. During that time he has provided his services to 20 different clients. He has completed a total of about 60 contracts.
Surely that in itself differentiates him totally from a permanent employee.
They say that you are more likely to be struck by lightning than be investigated for IR35.
Well, this is the second time that this IT Contractor has been investigated for IR35.
Represented by Qdos Accounting
Qdos Accounting represented him successfully.
He contracted for the DWP through Capita, via his personal service company Jensal Software Limited. Also, he renewed his contract every three months.
However, HMRC considered him to be a disguised employee and wanted him to pay the IR35 tax.
They said he owed them £26,669 in back tax, NI, penalties and interest.
Mutuality of Obligation
HMRC argued that there was a Mutuality of Obligation. They said that WP had to provide work for him and he had to do it. This is despite the contract between the two parties saying that there was no Mutuality of Obligation.
There was a Right of Substitution Clause in both the contract between Capita and DWP and between Capita and Jensal.
HMRC argued that it wasn’t effective as it was too widely drawn and WP would have to give their permission.
Supervision and Control
HMRC claimed that DWP had control over his work and that they integrated him into the project team.
However, DWP managers attested that he didn’t attend WP meetings as the staff did, carried out work as he saw fit and they couldn’t move im to another project or other work without himself and Capita agreeing to it.
In Business on His Own Account
Contract Not One of Employment
This HMRC IR35 Tax Court defeat will reverberate throughout the freelance profession.
See also Judge Blows Huge Hole in IR35.
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